Show captionEmployees move boxes our of the failed Lehman Brothers bank in New York in September 2008. Photograph: Sipa Press/Rex Features

Beware the dangerous orthodoxy of neoclassical economics

Letters

Academics Hugh Goodacre and Jeffrey Henderson voice their concern at the dominance of neoclassical theory in modern economics teaching, while Peter Swann and David Redshaw highlight the failures of recent economic models. John Clifford thinks August Strindberg was right all along

My colleagues at University College London, professors Blundell, Machin, Attanasio and others, are to be congratulated for providing such a succinct outline of the neoclassical school of thought in economics (Letters, 22 December). The ideas and methods of that school of thought, and those currents of research which accept its intellectual hegemony within the economics discipline (behavioural economics, game theory, etc) should undoubtedly be part of any curriculum taught to economics students today.

What is objectionable in the standpoint of such adherents of this dominant school of thought, however, is the doctrine that there are “no schools of thought in economics”, by which they mean, of course, that there is no other school of thought apart from their own. This idea – absurd as it appears to anyone who follows discussions on economic issues in the media and public life – has unfortunately become reality in the economics department of UCL and all too many other universities today, due to the ruthless exploitation by the dominant orthodoxy of its freedom to appoint and promote academic staff.

A particularly objectionable outcome of this is that UCL's economics department now prides itself on providing a curriculum to undergraduates that avoids “confusing” them by exposing them to the very idea that there are other schools apart from that of the orthodoxy. This is indoctrination, not education, and it is particularly mortifying that such a situation should have been allowed to occur at UCL, an institution established with radical intent by its founders, and even today proclaiming its dedication to the encouragement of critical thought.Dr Hugh GoodacreFormer member of the academic board, and teaching fellow in the department of economics, University College London

• Professor Orazio Attanasio and others defend use of unrealistic assumptions in economics: “The London tube map is not realistic and makes absurd assumptions. If it did not it would be illegible and useless. The map is useful precisely because it abstracts from unnecessary details to show you the way.”

Yes, indeed, the tube map is great so long as you travel by tube. But if there is a tube strike and you have to make your way on foot, its unrealistic assumptions will lead you astray. The same problem arises with economic models based on unrealistic assumptions. They may forecast very well in a limited context (economists call this “restricted domain”). But outside that limited context (ie “unrestricted domain”), a model based on unrealistic assumptions will, sooner or later, go wrong. This is why unorthodox economists get so agitated about the use of unrealistic assumptions in mainstream economics.Peter SwannBeeston, Nottinghamshire

• In their letter attacking Larry Elliott’s critique of neoclassical economics (A modern-day Martin Luther really nails it: economics needs a Reformation of its own, 18 December), my esteemed colleagues completely miss the point of his argument. He does not critique economic expertise per se, but only that of those who adhere to the neoclassical (“orthodox”) paradigm and thus typically assume that it, and it alone, has a monopoly on truth.

Elliott’s argument is that it is precisely the truth claims of neoclassical economists and their systematic exclusion of all other economic expertise (through faculty hiring practices and degree curricula that fail to acknowledge the importance of alternative – heterodox – conceptions) that is dangerous. Indeed, history has shown it to be so on numerous occasions over many years when neoclassically legitimated policies have devastated the livelihoods (and sometimes the lives) of millions of people across the globe.

But what do I know? I am merely an economic sociologist who studies actually existing capitalist economies (rather than idealised versions of them), in their historical provenance and with their complex social, cultural and political asymmetries: the “unnecessary details”, as your correspondents would have it.

But let me leave the last word to a bona fide (though heterodox) economist, Neil Kay. In his book, The Emergent Firm, he comments: “the individual intent on pursuing a career as an economist has to be bright enough to understand the abstract ramifications of neoclassical theory, and dumb enough to have faith in them.”Jeffrey HendersonProfessor of international development, University of Bristol

• The august bunch of professors who objected to Larry Elliott’s view of them seem to have missed a rather obvious point. The mathematical models and “vast amounts of data” were of no use to them, or us, in 2007. Indeed one of the very few people who sounded warning bells about the overheating economy was Gillian Tett of the Financial Times, someone who is obliged by her job to exist in the real world rather than the dusty portals of academe. Do you really need complicated models to work out that if the 100% mortgages that helped cause the economy to crash in 1990 then became 125% under New Labour you would probably see a very damaging correction at some point? Or that if Nigel Lawson’s financial sector remained unreformed you would likely see more banking and financial scandals like the Barings, BCCI and pension mis-selling scandals that occurred before 1990? No wonder economics students up and down the country are protesting about these precious models having little connection with life outside the lecture room window.David RedshawGravesend, Kent

• The attack by Professor Orazio Attanasio et al on Larry Elliott’s profound article misses the point and reaches again for the armoury of jargon which obfuscates the issues, even for other thinking people. Elliott’s “taking account of the complexity of markets, the constraints imposed by nature and rising inequality” challenges their academic and economic hegemony. Maybe Larry Elliott is thinking too deeply for them and gets to the heart the matter.

The Austrian sociologist and economist Egon Matzner wrote that only idiots and economists believe that limitless growth is possible in a finite world. The late David Jenkins, former bishop of Durham, once told a meeting of the Edinburgh Fabian Society that believing in the markets was like believing in the Virgin Mary. So maybe August Strindberg hit the nail on the head when he wrote: “What is economics? A science invented by the upper class in order to acquire the fruits of the labour of the underclass.” How about a spot of social and ecological justice for 2018?John CliffordEdinburgh